The chairman of the trade association immediately answered the open letter, repeated call for regulation.

Sam Woods, CEO of the Bank of England Prudential Regulation Authority, has written an open letter to CEOs in the United Kingdom, telling them to take responsibility for the risks involved in cryptocurrency business deals.

The PRA is a regulatory body formed in 2013 to oversea banks, building societies, credit unions, insurers and major investment firms in the UK. It was one of the bodies formed to take over from the Financial Services Authority, which was dissolved in 2013 because of its many failings (the other is the Financial Conduct Authority).

“Reputational risks”

Woods wrote that firms should bear three things in mind when dealing with cryptocurrency:

They must act “in a prudent manner”

They must have “effective risk strategies and risk management systems”

They must be open in their dealings with the regulatory authorities, disclosing “anything relating to your firm of
which we would reasonably expect notice.”

He said that companies should bear in mind that crypto-assets are new and evolving. Accordingly, they should assign at least one member of staff specifically to this area. This person/team should be approved by the PRA. Companies should also be aware of financial risk and design their risk management measures accordingly.

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It concludes by informing the industry that the regulatory authorities are still discussing how exactly to regulate crypto-assets, and will inform the industry of all developments.

CryptoUK response

Iqbal Gandham, Managing Director of eToro UK and Chairman of CryptoUK, a self-regulatory trade association of cryptocurrency firms that has been actively campaigning for the British government to regulate the industry, responded to the letter.

He said that most cryptocurrency firms in the UK already replicate the compliance models used for traditional financial service firms, and Wood’s requests echo those that CryptoUK has been making for a while.

“Currently, the risks from cryptocurrencies largely stem from low levels of consumer knowledge and a lack of an appropriate regulatory framework surrounding them,” said Ganham. “The UK has the potential to become a world leader within the crypto economy. We urge governments and regulators to ensure that the UK is well-positioned to seize the opportunities that this sector could bring.”

Last week, CryptoUK gave evidence to a parliamentary committee regarding cryptocurrency regulation in the UK. During the meeting, it representatives from the industry explained how cryptocurrency works, why regulation would be good for both the industry and the public, and debated the merits of cryptocurrency with a journalist from FT Alphaville.